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This is a blog with spoiler free reviews. Most will be Fantasy, Science Fiction, and Horror, but there will be some books in other genres, including the occasional Non-Fiction review. There is an ongoing series of Cover Reveal Round-Ups, and sometimes I'll write an article on something that interests me.

08 February, 2011

AMAZON'S HIDDEN EXTRA CHARGES: DOES AUTHORS AND PUBLISHERS GET A CUT?

INTRODUCTION

On January 28th this year I got a newsletter e-mail from HarperCollins Book Blast, informing me that a free Septimus Heap book was available, in formats including Kindle.

I'm not a huge fan of e-books, but this is a book I've seen in Norwegian translation in the bookstores here. So I wanted to take a look. I downloaded Kindle for PC, and clicked on the e-mail link. What happened next surprised me:

Amazon.com wanted to charge me $2 for the book whose buy page listed the book's title as "Septimus Heap, book one: Magyk Free With Bonus Material".

This got me curious, so I started to investigate.

AMAZON.COM'S HIDDEN INTERNATIONAL CHARGES

After encountering what I related above, I started checking out Amazon.com. (NOTE: In Norway you get directed to Amazon.com for Kindle purchases.) It turns out that Amazon charges an extra $2 for many of its Kindle books, but not all. However searching for Kindle books, with lowest price first, shows up no books under $2. But I have found other books as low as $0.99, this could be a glitch based on other findings I have made.

When I first looked at this on January 28th, most books on Amazon's official list changed price. This has been rectified, and they now show up with a $2 higher price. A reason I stated above that the books who doesn't get the $2 price raise could be a glitch.

I asked a US blogger I know to check the price of A Game of Thrones on the Kindle some hours ago, the answer was $5.00. Here's the image I got on my buy page here in Norway:

And it even says that it "includes free international delivery". (Amazon Whispernet looks to be another name for the internet as far as looking at Amazon tells me.)

I tried to get an answer to this on Amazon's forums. I could find no answer to it from anyone officially affiliated with Amazon. Several international Kindle users reported price hikes in the $0.99-$3.20 range, even on free Kindle books. And the same users had bought the Kindle with free delivery stated. Someone even on the day before their forum post.

American forum users blamed this on European governments. Answering this, several posts from Europeans stated that VAT was a percentage, not a flat fee, and that however many percent of 0 = 0. (Some of the posts pointing out it could not be VAT were flagged as "Does not add to the discussion"...)

I checked Norwegian VAT laws. They were a bit difficult to sort through as I don't speak legalese, but there is no VAT for imports under 200 NOK (Norwegian Kroner) to Norway. (At 06.10 February 8, this is $34.65.)

And I would think that Amazon would tell me if I was paying any charges they have no control over.

PRICING EXAMPLES

I wanted some concrete examples from today, so I found a user list on Amazon that had different prices than the buy page. Prices on the list have been updated, I assume automatically, since it was written. Many books are priced above the "Free to $2.99" the list is said to cover. However, as opposed to the above example with A Game of Thrones, this list has not been updated with the automatic $2 hidden charge.

I asked author John Locke, on twitter, if I could use his books as a pricing example. He said yes, and here is what the list above shows:

This is what the buy page shows:

This is the $2 hidden price raise for buying in Norway I have been talking about.

DOES AUTHORS AND PUBLISHERS GET A CUT?

So to the question in this blog post's headline: Does authors and publishers get a cut?

This to me is the interesting question. Where do the extra $2 go? It doesn't actually matter to me personally. I'm only going to download free e-books to my Kindle for PC. But since there is absolutely no mention of it on Amazon, that I managed to find, I started to wonder. I could have asked John Locke, but I wanted to write this blog post based on what an average customer could be expected to find out.

It is very interesting if Amazon alone pockets the extra $2. For John Locke it means that international Kindle sales, of at least some of his books, should have given him three times as much money.

For a publisher we could potentially be talking huge sums if they are not aware of this. And if they are not, Amazon could be in some trouble.

There is of course a chance that both authors and publishers are aware of this, and get their cut of the extra money. Something I don't have a big issue with. But it means that free books for Kindle is not something an international customer can see as an argument for buying the Kindle. (NOTE: Gutenberg.org does have Kindle editions of their free books. But most of these are out of copyright books.)

It seems at best very immoral to me that international customers have to pay an extra charge that is, judging from Amazon's own forums, not defined. And not in any way made public knowledge.

I would love for authors and publishers to comment on whether they were aware of the hidden $2 charge. And also to give their reactions to it.

I would of course also welcome comments from international Kindle customers about their experience with this, and what they think of it. And I would like to hear from American, and other Kindle customers with regional Amazon shops too.

NOTE: I have other examples. But felt it was enough with those I have used.

Interesting post, Ole! Another reason to hold off on getting a proper e-reader for the moment. I guess that iPad is looking like more and more of an option, instead of a Kindle or other store-bound reader.

@Reena Well...converting $0 is free. And if you use a Norwegian credit-card to pay in a foreign currency you will get charged the equivalent in NOK on the day it is charged. (Actually making it possible to save money if you follow exchange rates for larger purchases.) I think this is true for all credit cards. If there are any fees associated with it, they get charged to the customer, not the company.

Yes, something is fishy. I've ruled out taxes, wireless/3G, and now you have helped me rule out currency exchange. -Too bad Amazon isn't giving an answer to this. (Or the publishers/authors for that matter.)

I wonder if this "fee" is some kind of surcharge for ordering from Amazon.com instead of the Norway equivalent?

Amazon likes to keep all their sales compartmentalized. (I make this claim only because I see my own books at Amazon.uk and amazon.com and reviews are only posted on the .com version of Amazon.)

If Amazon keeps its reviews segregated, I can only imagine that they keep everything else separated, too.

That being said, I can't tell you if I receive additional royalties from foreign sales vs. US sales because my royalty statements only deal in raw numbers: I don't know where the sales are made. (I'll be sending off a note to my publisher to find out if they receive that information...)

Since, I've never seen more royalties than the percentage I've been offered by my publisher, I can only assume that all my sales have been US sales.

An "upcharge" seems way out of line on Amazon's behalf. Price gouging, if you will. If this is the case, they should be called out for it. Even with a separation of servers/business entities/ etc. I can't see how Amazon can justify this kind of fee on electronic materials.

There is no Amazon in Norway, and since we are only 5 million people, I doubt there ever will be.

Amazon.com is the default for buying Kindle books. If I go to amazon.co.uk I get told I need to go to amazon.com to buy Kindle books.

I hope you find out about the extra $2 Amazon charges. Someone checked with Amazon and they claim it is a wireless charge. But since they charge it regardless of whether you use a 3G Kindle or not, that is a false statement. And anyway they advertise their Kindles with free delivery.

As someone who loves books, and therefore authors and publisher, I'd like to see Amazon sharing their extra $2 charge with the author/publisher. If they don't they are scamming both them and the Kindle-book buyers in my opinion.

That claim about the delivery charge is stupid. You can still download the classics for free so there seems to be no delivery charge even though it would actually "cost" the same. And about using your own amazon: I'm in Germany and there is no Kindle store on amazon.de. The German site tells us to go to the US site so it can't be that. It's just making money and another reason for me to not buy ebooks there.Luckily there are more than enough other stores who don't invent crazy fees for non-US buyers.

I'm a publisher. I can't speak for-sure as to whether we get a cut of the royalties, because our first anthologies just launched a few days ago and they just went live on the Kindle store, and we don't have a history of sales there yet. But what I can say is this:1) Nowhere in the Kindle agreement are we told that non-U.S. customers pay an additional $2 fee; and2) The publishers *already* pay a delivery surcharge. The charge is determined by the size of the ebook, and the publishers pay that charge (it's taken out of the earnings we receive), not the customer. So the idea of Amazon demanding an $2 "delivery surcharge" from the customer, in addition to what the publisher is already paying for delivery, is complete poop. Note that I'm not saying it's ridiculous; I have enough experience with Amazon to know that such a move is entirely plausible coming from them. Which brings us to...3) Amazon has a long history of screwing over both customers and publishers in many ways.

Those three - and especially the first 2 - being the case, I would be shocked if publishers (and, by extension, writers) see any of that $2 surcharge.

I've suspected all along that Amazon keeps the extra $2 for themselves. Unfortunately Amazon goes out of their way not to share their numbers. But it would be interesting to know how much money we are talking about here.

No, a chunk of that (and probably most) goes to telcos - they provide the whispernet functionality after all. So no telco in your country has been willing to make a deal, or there aren't enough customers for Amazon to bother doing it - although the latter is more unlikely.

Telcos charging smaller countries a fortune for 3G internet access is much more believable.

The extra $2 used to be charged here, too, until they made a deal with one of the companies here.

The $2 is for delivery to Kindle for PC too, and that shouldn't cost Amazon anything. I'm going to try to find out how 3G on Kindle works here for my follow up post. And as Robin Wolfe says in the comment above, the publishers already pay for delivery of the e-books.

You're right to rule out VAT: Amazon add VAT for UK sales at 15%, and I assume they do this for the rest of the EU. That doesn't account for a $2 surcharge. They do typically add a charge for delivery on books priced $2.99 and above, but I've just checked some of our infinity plus ebooks and that's typically 3 to 5 cents. I think the telco explanation is the most likely, although why that adds up to a fat round $2 I don't know! Amazon certainly don't appear to explain it (or even mention it) in their publisher documentation, although I've heard from others about this charge.

Ah you're right: even that 3 to 5 cents is taken off what we receive as publishers, rather than being added to the price to purchasers! It sounds to me as if the $2 is just a round figure they add to cover increased telco charges: internet delivery may be free, but it subsidises 3G delivery in that country.

In the UK (and in the Canary Islands, where I was in January), my Kindle just uses whatever 3G is available - it isn't tied to any other 3G service I use, so no subscription charges. The other odd thing is that it's tied to where your Kindle is registered, so when I was in the Canaries (ie Spain) I didn't get charged the $2 levy that locals are charged. I'm sure there's a reason for it. Somewhere...

As far as I know, Amazon does this everywhere outside USA/UK/Canada. Even though they claim free delivery and that they will specify additional charges. It sounds like a scam.I wonder how much money we are talking about for last year...

There are exceptions, Weirdmage. Friend in Bangkok didn't get charged (I'm in the Philippines and I'm getting charged--even if it's just for download to an iPod Touch [obviously has no 3G, doing it via WiFi])

I have heard that Amazon.com are collecting the extra charge just in case foreign governments start claiming they are owed VAT - this however cannot be the case. A supplier outside the EU should not be charging VAT to an EU customer. And even if they could the place of supply would be the EU country so it would be that countries VAT rate not a flat rate.

That being said we've published a few eBooks with Amazon and I have noticed that the extra charge is not a flat rate but around 17.5% on the price we set, which is bizarre as the Irish VAT rate is 21%.

In Ireland it's the same story as the Norway - customers are diverted to Amazon.com for eBook purchases. I don't have a Kindle and this is just another reason not to get one.

Huh... but then I look for specific titles I know are cheap (search for 'Saving Rachel' - the book that made the press recently for becoming an ebook best seller with its $0.99 pricing), and I get the expected price of $0.99.

I just checked, and I come up with the same. "Saving Rachel" is $0.99, but showing Kindle books sorted "Price: Low to High" starts with books costing $2. Not sure why, I'll have to try and find out for my follow up post.